HE 


UC-NRLF 


.A5 
191  1 


GIFT  OF 


•5, 


Mail  Carrying  Railways 
Underpaid 


A  Statement  by  the  Committee 
on  Railway  Mail  Pay  representing 
214,275  miles  of  Railway  in  the 
United  States,  operated  by  268 
companies,  containing  facts  and 
figures  which  prove  that  Railway 
Mail  Pay  does  not  equal  the  oper- 
ating expenses  that  it  makes  nec- 
essary, leaving  nothing  for  return 
upon  the  value  of  the  property. 


THE  COMMITTEE  ON  RAILWAY 
MAIL    PAY 


J.  KRUTTSCHNITT,  Chairman 

Director  of  Maintenance  and  Operation,   Union  and 
Southern  Pacific  Systems 

RALPH  PETERS,  Vice-Chairman 
President,  Long  Island  Railroad 

CHARLES  A.  WICKERSHAM 

President  and  General  Manager,  Western  Railway 

of  Alabama 

W.  W.  BALDWIN 

Vice-President,  Chicago,  Burlington  & 
Quincy  Railroad 

W.  W.  ATTERBURY 
Vice-President,  Pennsylvania  Railroad 

GEORGE  T.  NICHOLSON 
Vice-President,  Atchison,  Topeka  &  Santa  Fe  Railway 

E.  J.  PEARSON 
First  Vice-President,  Missouri  Pacific  Railway 

E.  G.  BUCKLAND 

Vic«-President,  New  York,  New  Haven 

&  Hartford  Railroad 

C.  F.  DALY 

Vice-President,  New  York  Central  Lines 

W.  A.  WORTHINGTON 

Assistant  Director  of  Maintenance  and  Operation, 
Union  and  Southern  Pacific  Systems 

W.  F.  ALLEN,  Secretary 
H.  T.  NEWCOMB,  Statistician 


Mail  Carrying  Railways  Underpaid 


A  STATEMENT 

By  the 

Committee  on  Railway  .Mail  Pay 

representing 

214,275  miles  of  Railway  in  the  United  States, 
operated  by  268  companies, 

containing  facts  and  figures  which 
prove  that 

RAILWAY  MAIL  PAY 

does  not  equal  the  operating  expenses  that  it  makes 

necessary,    leaving    nothing    for 

return  upon  the  value 

of  the  property. 


October,  1912. 


,** 

TABLE   OF    CONTENTS.  Page 

I.  Scope  of  this  Pamphlet 3 

II.  Railway  Mail  Pay  Is  About  to  be  Forced  Still  Further  Below  the 
Level  of  Just  Compensation,   Unless   Payments   are  Promptly   Read- 
justed,   on    Account    of    the    Additional    Volume    of    Mail    that    will 
Result  from  the  Inauguration,  on  January  1,  1913,  of  the  Parcels  Post.    3 

III.  The   Postmaster-General's    Erroneous   Assertion    that    the   Railways 
were  Overpaid  "About  $9,000,000.00"  in  the  Year  1909,  Rests  Primarily 
Upon  His  Adopting  an  Unprecedented  Theory  which  Allows  Nothing 
for  a  Return  Upon  the  Capital  Invested  in  Railway  Property 4 

IV.  The  Mail   Service   Supplied   by  the  Railways   Costs  Them   More   in 
Operating  Expenses  and  Taxes  than  They  Are  Paid  For  It,  and  Leaves 
Nothing  for  Return  on  the  Property 6 

V.  The  Postmaster-General's  Apportionment  of  Space  Between  the  Mail 
Service  and  the  Other   Services  Rendered  on  Passenger  Trains  Did 
Not  Allow  to  the  Mails  the  Space  which  They  Actually  Require  and 
Use  and  this  Had  the  Result  of  Unduly  Reducing  His  Estimates  of 
the  Cost  to  the  Railways  of  the  Mail  Service 9 

VI.  The  Postmaster-General  Ignored  Data  which  He  Had  Obtained  Show- 
ing Expenditures  on  Account  of  the  Mails  Largely  in  Excess  of  the 
Direct  Expenses  for  that  Service  which  He  Reported 11 

VII.  The  Month  of  November  Is  Not  a  Fair  Average  Month  in  Any  Rail- 
way Year  or  One  that  Is  Typical  of  a  Year's  Business  and  Its  Use  as 
the  Sole  Basis  of  the  Postmaster-General's  Calculations  was  So  Un- 
favorable to  the  Railways  as  to  Deprive  tlje  Results  of  Any  Value 
Even  If  in  All  Other  Respects  His  Methods  were  Beyond  Criticism 13 

VIII.  A  Commission  of  Senators  and  Members  of  Congress  which,   Be- 
tween 1898  and  1901,  Most  Fully  and  Carefully  Investigated  the  Sub- 
ject, Ascertained  and  Declared  that  Railway  Mail  Pay  was  Not  Then 
Excessive;  Since  Then  there  Have  Been  Many  and  Extensive  Reduc- 
tions in  Pay  Accompanied  by  Substantial  Increases  in  the  Cost  and 
Value  of  the  Services  Rendered  by  the  Railways 14 

IX.  The  Administration  of  the  Post  Office  Department  Has  Not,  in  the 
Last  Twelve  Years,  Effected  any  Reduction  in  the  Annual  Total  of  Its 
Expenses  for  Other  Purposes  than  Railway  Transportation  or  in  the 
Proportion  of  Its  Revenues  Required  for  Such  Other  Expenses,   but 
the  Whole  Saving  Which  Has  Nearly  Eliminated  the  Annual  Deficit 
of  the  Department  Is  Represented  by  the  Reduced  Payments,  Per  Unit 

of  Service,  to  the  Railways 17 

X.  The  Continuous  Refusal  of  the  Post  Office  Department  to  Order  Re- 
weighings  of  the  Mails  Except  After  the  Maximum  Interval  of  Four 
Years  which  the  Law  Allows,  the  Demands  for  Station  and  Terminal 
Services  that  Are  Rendered  Without  Any  or  Without  Adequate  Compen- 
sation and  the  Unjust  Discrimination  Against  Compartment  Cars  Used 
as  Railway  Post  Offices  Are  All  Abuses,   Seriously  Injurious  to  the 
Railways,  Which  Have  Grown  Up  Under  the  Present  System  of  Pay- 
ment and  Ought  at  Once  to"  Be  Remedied 18 

XI.  The  Postmaster-General's   Proposed   Plan   of   Payment   Based   Upon 
Operating  Cost  and  Taxes,  to  Be  Ascertained  by  the  Post  Office  Depart- 
ment, Plus  Six  Per  Cent.  Is  Seriously  Wrong  in  Principle  and  Would 
Encourage  and  Perpetuate  Injustice 20 

Appendices. 

A.  Extracts  from  the  Postal  Laws  and  Regulations 23 

B.  Classification  of  Operating  Expenses ... 27 

C.  Receipts  from  Passenger  and  Freight  Traffic  by  Months 28 

D.  How  Railway  Wages   Have  Increased 29 

E.  How  Railway  Taxes  Have  Increased 30 

F.  Letter  dated   September  11,   1912,   from   Hon.   Jonathan   Bourne,   Jr., 

Chairman,  Senate  Committee  on  Post  Offices  and  Post  Roads 31 

G.  Reply  made  thereto  by  the  Committee  on  Railway  Mail  Pay 32 


I.     SCOPE  OF  THIS  PAMPHLET. 

The  Committee  on  Railway  Mail  Pay,  representing  railways  whose 
lines  include  ninety-two  per  cent,  of  the  aggregate  length  of  all  railway 
mail  routes  in  the  United  States,  believes  that  the  payments  to  the  rail- 
ways for  the  services  and  facilities  furnished  by  them  to  the  Post  Office 
Department  are,  and  for  a  long  time  have  been,  unjustly  low.  This 
pamphlet  contains  a  concise  statement  of  the  facts  which  prove  that  this 
belief  is  warranted  and,  incidentally,  a  refutation  of  the  estimates  made 
by  the  Postmaster-General,  and  reported  to  the  Congress  (House  Docu- 
ment No.  105,  Sixty-second  Congress,  first  session),  which  led  him  to 
conclude  that  the  basis  of  payment  could  now  properly  be  changed  so 
as  to  accomplish  a  present  reduction  of  about  twenty  per  cent.  It  will 
be  shown  that  although  the  insufficient  data  and  the  erroneous  methods 
employed  by  the  Postmaster-General  resulted  in  his  making  estimates  of 
cost  to  the  railways  that  are  far  bejow  the  real  cost,  his  own  figures  and 
calculations,  when  properly  analyzed  and  supplemented,  demonstrate  that 
the  mail  service  has  not  been  fairly  remunerative  to  the  railways. 

Before  proceeding  to  this  demonstration  it  should,  however,  be  noted 
that— 

II.  RAILWAY  MAIL  PAY  IS  ABOUT  TO  BE  FORCED 
STILL  FURTHER  BELOW  THE  LEVEL  OF  JUST  COMPEN- 
SATION, UNLESS  PAYMENTS  ARE  PROMPTLY  READJUSTED, 
ON  ACCOUNT  OF  THE  ADDITIONAL  VOLUME  OF  MAIL 
THAT  WILL  RESULT  FROM  THE  INAUGURATION,  ON  JANU- 
ARY 1,  1913,  OF  THE  PARCELS  POST. 

Congress  has  provided  for  a  vast  and  incalculable  extension  of  mail 
traffic  by  creating  a  "Parcels  Post,"  to  be  inaugurated  on  January  1,. 
1913,  which,  by  opening  the  mails  to  many  articles  not  previously  ac- 
cepted at  the  post-offices  and  by  materially  reducing  the  rates  on  mailed 
merchandise,  is  expected  enormously  to  increase  the  volume  of  the  ship- 
ments which  it  covers.  The  Government  seems  to  have  assumed  that, 
under  existing  contracts,  which  were  made  before  the  meaning  of  the 
word  "mail"  was  thus  extended,  the  railways  can  be  compelled,  until 
these  contracts  expire,  to  carry  this  great  additional  volume  of  mail 
traffic  WITHOUT  ANY  COMPENSATION  WHATEVER.  If  the 
former  practice  of  the  Post  Office  Department  is  followed,  no  new  con- 
tracts will  be  made  until  after  the  next  quadrennial  weighings  in  each 

327588 


of  the  four  weighing  sections.,  s,o  that  the  position  of  the  Government 
amounts  to  un  assertion  that  the  whole  added  volume  of  the  Parcels  Post 
mails  will  have  to  be  carried  without  any  compensation  by  the  railways 
of  New  England  for  four  years  and  six  months  (these  railways  are  in 
the  first  weighing  section  but  the  weighing  for  the  adjustment  to  be 
made  on  July  1,  1913,  has  begun  and  will  be  completed  before  the 
Parcels  Post  is  inaugurated),  by  those  of  the  second  weighing  section  for 
three  years  and  six  months,  by  those  of  the  third  weighing  section  for 
two  years  and  six  months,  by  those  of  the  fourth  weighing  section  for 
one  year  and  six  months,  and  by  those  of  the  first  weighing  section,  not 
located  in  New  England,  for  six  months.  No  presentation  of  the  injus- 
tice of  the  mail  pay  received  in  former  years  suggests  even  the  approxi- 
mate extent  of  the  losses  which  the  railways  will  thus  incur  in  the 
next  four  and  one-half  years,  unless  readjustments  are  promptly  made 
on  account  of  the  Parcels  Post. 

III.  THE  POSTMASTER-GENERAL'S  ERRONEOUS  AS- 
SERTION THAT  THE  RAILWAYS  WERE  OVERPAID  "ABOUT 
$9,000,000.00"  IN  THE  YEAR  1909,  RESTS  PRIMARILY  UPON 
HIS  ADOPTING  AN  UNPRECEDENTED  THEORY  WHICH  AL- 
LOWS NOTHING  FOR  A  RETURN  UPON  THE  CAPITAL  IN- 
VESTED IN  RAILWAY  PROPERTY. 

The  Postmaster-General  assumed  that  the  railways  would  be  pro- 
perly compensated  if  they  received  a  sum  equal  to  the  operating  expenses 
and  taxes  attributable  to  the  carriage  of  the  mails  plus  six  per  cent,  of 
the  sum  of  those  expenses  and  taxes.  The  calculation  by  which  he  ob- 
tained the  sum  which  he  assumed  would  have  been  proper  compensation 
for  the  single  month  covered  by  his  investigation  was  as  follows: 

His  estimate  of  operating  expenses  and  taxes  on 

account  of  mail  service  (Document  No.  105,  p. 

280)  for  one  month $2,676,503.75 

Six  per  cent,  of  above 160,590.22 


Total,  assumed  to  represent  just  compensa- 
tion for  one  month $2,837,093.97 

The  railways  having  been  paid,  for  the  month  selected,  $770,679.16 
in  excess  of  the  sum  resulting  from  the  above  calculation,  the  Post- 
master-General assumed  that  this  excess  over  expenses  and  taxes  plus  six 
per  cent,  constituted  excessive  profit  for  that  month.  He  multiplied  this 
assumed  excess  by  twelve  to  get  his  estimate  of  annual  excess  and  stated 
the  result,  in  round  figures,  as  "about  $9,000,000." 

The  mere  statement  of  this  method  discloses  the  fact  that  it  makes 
no  allowance  for  any  return  upon  the  fair  value  of  the  railway  property 

4 
i 


employed  in  the  service  of  the  public.  This  omission  is,  of  itself,  suffi- 
cient wholly  to  destroy  the  Postmaster-General's  conclusion.  Everyone 
recognizes  that  a  railway  is  entitled  to  at  least  a  reasonable  return  upon 
the  value  of  its  property  devoted  to  the  public  service.  The  Postmaster- 
General  ignored  this  universally  accepted  principle  and  adopted  a  theory 
which,  if  applied  to  the  general  business  of  the  companies,  would  render 
substantially  every  mile  of  railway  in  the  United  States  immediately  and 
hopelessly  bankrupt.  The  recently  published  report  of  the  Interstate 
Commerce  Commission  on  the  railway  statistics  of  the  year  that  ended 
with  June  30,  1910,  contains  data  by  which  this  statement  is  easily 
demonstrated,  as  follows: 

Operating  expenses  of  all  United  States  rail- 
ways, for  the  year $1,822,630,433 

Taxes  of  all  United  States  railways,  for  the  year        103,795,701 


Total   $1,926,426,134 

Six  per  cent,  of  above  total 115,585,568 


Total  gross  receipts  permitted  by  Post- 
master-General's plan $2,042,011,702 

But  if  this  plan  had  been  in  force,  the  railways  would  have  had,  for 
interest  on  mortgage  bonds,  a  reasonable  surplus  as  a  margin  of  safety, 
dividends  on  stocks,  unprofitable  but  necessary  permanent  improve- 
ments,* rents  of  leased  properties,  etc.,  etc.,  only  the  six  per  cent,  or 
$115,585,568.  This  figure  may  be  compared  with  the  following,  among 
others : 

Interest  obligations    (on  funded   debt  only)    of 

all  United  States  railways,  for  the  same  year. .   $370,092,222 

Rentals  of  leased  properties,  all  United  States 

railways,  for  the  same  year $133,881,409 

Plainly,  the  Postmaster-General's  proposal  is  equivalent  to  an  asser- 
tion that  the  railways  would  make  a  fair  profit  if  they  were  enabled  to 
collect  the  sum  of  $115,585,568  in  addition  to  their  operating  expenses 
and  taxes,  but  the  figures  given  by  the  Interstate  Commerce  Commission 

*  The  necessity  for  providing,  out  of  income,  for  some  kinds  of  improve- 
ments is  commonly  admitted.  The  public  constantly  demands  greater  comfort 
and  convenience  which  can  be  supplied  only  by  improvements  in  property  and 
equipment  that  bring  in  no  additional  income.  A  present  example  in  the  mail 
service,  itself,  is  the  great  expense  which  the  railways  are  now  undergoing  in 
substituting  steel  mail  cars  for  those  formerly  in  use.  The  old  cars,  which 
thus  become  a  total  loss  were  fully  up  to  the  most  advanced  standards  of  con- 
struction when  built  and  they  could  continue  for  a  long  time  to  serve  the 
purposes  of  the  service  except  for  the  public  demand  for  stronger  cars. 


show  that  this  would  be  less  than  one-third  of  the  sum  necessary  to  meet 
interest  charges  which  must  be  paid  in  order  to  prevent  foreclosures  of 
mortgages  and,  if  bond  interest  could  be  ignored,  is  much  less  than  the 
rentals  that  must  be  paid  if  the  existing  systems  are  not  to  be  broken 
up.  And,  of  course,  it  would  allow  nothing  whatever  for  legitimate 
demands  upon  income  for  dividends,  permanent  improvements  or  surplus. 

It  is  unnecessary  to  dwell  upon  the  consequences  of  such  a  theory 
of  "compensation"  to  railroad  credit  and  to  the  public  interest  in  effi- 
cient transportation  service,  to  say  nothing  of  the  consequences  to  owners 
of  railroad  stock  and  bonds.  Such  a  theory  is  not  a  theory  of  compen- 
sation— it  is  a  theory  of  oppression  and  of  destruction. 

The  fact  that  the  Postmaster-General  has  found  it  necessary  to 
justify  his  attack  upon  the  present  basis  of  railway  mail  pay  by  a  theory 
so  unprecedented  and  so  unwarranted  in  principle  and  in  law,  raises  a 
strong  presumption  against  all  his  opinions  and  conclusions  upon  this 
subject. 

IV.  THE  MAIL  SERVICE  SUPPLIED  BY  THE  RAILWAYS 
COSTS  THEM  MORE  IN  OPERATING  EXPENSES  AND  TAXES 
THAN  THEY  ARE  PAID  FOR  IT,  AND  LEAVES  NOTHING  FOR 
RETURN  ON  THE  PROPERTY. 

It  cannot  be  too  strongly  emphasized  that  the  railway  mail  pay  at 
present  is  insufficient  to  pay  even  its  proper  share  of  operating  cost  and 
taxes  and  does  not  produce  any  return  upon  the  property.  This  will 
be  demonstrated  by  any  fair  inquiry,  as  will  now  be  shown.  Reports 
submitted  to  the  Postmaster-General  by  railways  operating  2,411  mail 
routes,  with  a  total  length  of  178,710  miles,  showed  that  their  gross 
receipts,  per  car-foot  mile*,  from  services  rendered  on  passenger  trains 
during  November,  1909,  were  as  follows: 

From  mail 3.23  mills 

From  other  services. ." 4.35  mills 

Thus  it  appears  that  the  space  on  passenger  trains  required  for  the 
mails  is  proportionately  less  than  three-quarters  as  productive  as  that 
devoted  to  passengers,  express,  milk,  excess  baggage,  etc.,  etc.  As  it  is 
the  general  belief  of  railway  managers,  whose  conclusion  in  this  respect 
has  rarely  if  ever  been  challenged,  that  the  passenger  train  services,  as 
a  whole,  do  not  produce  revenues  sufficient  to  meet  their  fair  proportion 
of  the  operating  costs  and  the  necessary  return  upon  investment,  and 

*  A  car-foot  mile  is  a  unit  equal  to  moving  one  foot  in  car  length  (re- 
gardless of  width  or  height)  one  mile.  Thus  to  move  a  car  sixty  feet  long  one 
mile  results  in  sixty  car-foot  miles ;  to  move  the  same  car  three  miles  results 
in  180  car-foot  miles,  etc. 

6 


therefore  are  not  reasonably  compensatory,  it  is  evident  that  the  mail 
service,  the  pay  for  which  is  more  than  twenty-five  per  cent,  below  the 
average  for  the  other  services  rendered  on  the  same  trains,  must  bring  in 
much  less  than  reasonable  compensation.  Certainly  railroad  revenues 
as  a  whole  could  not  be  reduced  twenty-five  per  cent,  without  destroying 
all  return  upon  the  property.  If  so,  it  must  be  true  that  there  can  be 
no  compensation  in  a  rate  of  mail  pay  that  is  twenty-five  per  cent,  less 
than  the  rate  of  pay  for  passenger  traffic  which,  as  above  shown,  is  rela- 
tively unprofitable. 

No  merely  statistical  comparison  can,  however,  reveal  the  whole 
story  for  the  railways  are  required  to  furnish  many  incidental  facilities 
and  to  perform  many  additional  services  for  the  Post  Office  Department, 
which  render  the  mail  service  exceptionally  arduous  and  costly.  These 
extra  services  include  calling  for  and  delivering  mails  at  a  large  propor- 
tion of  the  post  offices  located  at  railway  towns;  supplying  rooms,  with 
light,  heat  and  water,  in  railway  stations  for  the  use  of  the  mail  clerks : 
placing  cars,  duly  lighted  and  heated,  on  station  tracks  for'  advance 
distribution,  often  many  hours  before  the  departure  of  trains;  carrying 
officers  and  agents  of  the  Post  Office  Department  as  passengers  but  with- 
out compensation  to  the  extent  of  more  than  50,000,000  passenger  miles 
annually  (this  bsing,  of  course,  in  addition  to  the  railway  mail  clerks  on 
duty),  etc.,  etc.  Extracts  from  the  "Postal  Laws  and  Kegulations"  defin- 
ing and  demanding  these  services  are  given  in  Appendix  A.  No  one  can 
examine  this  appendix  and  not  be  convinced  that  the  mail  service  is  the 
most  exacting  among  all  those  rendered  by  American  railways. 

The  fairness  of  railway  mail  pay  can  also  be  tested  by  apportioning 
operating  expenses  between  passenger  and  freight  traffic,  and  then  mak- 
ing a  secondary  apportionment  of  the  passenger  expenses  between  mail 
and  other  kinds  of  traffic  carried  on  passenger  trains.  This  method  in- 
volves charging  directly  to  each  kind  of  traffic  all  expenses  pertaining 
exclusively  thereto,  and  the  apportionment,  on  some  fair  basis,  of  those 
expenses  which  are  common  to  more  than  one  kind  of  traffic. 

In  accordance  with  the  request  of  the  Postmaster-General,  the 
railways  estimated  the  cost  of  conducting  the  mail  service  in  the  manner 
just  explained  and  reported  the  results  to  the  Postmaster-General.  After 
first  charging  to  each  service  the  expenses  wholly  due  to  it  they  appor- 
tioned the  common  expenses  between  the  passenger  and  freight  services, 
following  (with  inconsequential  exceptions)  the  method  most  generally 
employed  for  that  purpose,  namely  the  apportionment  of  these  expenses 
in  the  proportions  of  the  revenue  train  mileage  of  each  service.  Having 
estimated,  in  this  way,  the  operating  expenses  attributable  to  passenger 
trains,  the  railways  assigned  to  the  mails  the  portion  of  this  aggregate 
indicated  by  the  proportion  of  the  total  passenger  train  space  required 


for  the  mails.  Using  this  method,  186  railways,  operating  2,370  mail 
routes,  with  a  total  length  of  176,716  miles,  ascertained  and  reported 
that  for  November,  1909,  the  operating  expenses  (not  including  taxes), 
for  conducting  the  mail  service  were  $4,009,184.  The  Postmaster-Gen- 
eral states  (Document  No.  105,  page  281),  that  all  the  railways  repre- 
sented in  the  foregoing,  and  enough  others  to  increase  the  mileage  rep- 
resented to  194,978  miles,  were  paid  for  the  same  month  only  $3,607,- 
773.13.  It  thus  appears  that  the  pay  was  far  below  the  operating  ex- 
penses, without  making  any  allowance  for  taxes  or  for  a  return  upon  the 
fair  value  of  the  property  employed. 

While  different  methods  are  in  use  for  ascertaining  the  cost  of 
passenger  train  service  and  the  results  produced  by  such  methods  may 
show  considerable  variation,  yet  the  mail  pay  is  so  far  below  reasonable 
compensation,  from  the  standpoint  of  the  cost  of  the  service  and  a  return 
upon  the  value  of  the  property,  that  no  method  can  be  reasonably  urged 
which  would  not  demonstrate  the  non-compensatory  character  of  the 
present  mail  pay.  This  is  illustrated  by  the  method  which  the  Post- 
master-General himself  employed,  as  the  character  of  that  method  is  such 
that  it  necessarily  produces  the  very  lowest  estimate  of  cost  for  the 
passenger  train  service. 

The  Postmaster-General,  by  his  method  of 
apportionment  arrived  at  a  cost  of $2,676,503.75 

But  this  must  be  increased  (as  will  be  shown 
below,  on  account  of  his  erroneous  appor- 
tionment of  car  space  (page  10),  by 800,802.00 

And  also  on  account  of  his  refusal  to  as- 
sign expenses  directly  incurred  in  the  mail 
service  (page  12) 401,126.00* 

Total,  according  to  the  Postmaster- Gen- 
eral's method  of  apportioning  costs  be- 
tween passenger  and  freight  traffic $3,878,431.75 

Thus  even  the  Postmaster-General's  method  of  apportioning  costs 
between  freight  and  passenger  traffic  produces  an  operating  cost  in  excess 
of  the  total  pay  received  by  the  railways,  leaving  nothing  whatever  for 
return  upon  the  fair  value  of  the  property  or  necessary  but  non-income 
producing  improvements. 

There  is  no  allowance,  in  any  of  these  estimates  of  cost,  for  the  large 
volume  of  free  transportation  supplied  to  officers  and  agents  of  the  Post 
Office  Department,  when  not  in  charge  of  mail,  although  this  amounts  to 

*  There  may  be  some  duplication  in  this  item,  but  to  eliminate  it  would 
require  an  elaborate  computation  which,  in  view  of  the  broad  margin  of  ex- 
penses over  receipts,  is  wholly  superfluous.  Whatever  duplication  exists  must 
be  small  in  comparison  with  this  margin. 

8 


over  50,000,000  passenger  miles  annually  and,  at  the  low  average  rate  of 
two  cents  per  mile,  would  cost  the  Post  Office  Department  more  than 
$1,000,000  per  year. 

Moreover,  as  will  presently  be  shown  (pages  13-14)  all  the  figures 
here  discussed  are  for  the  month  of  November,  a  month  which,  because 
of  the  abnormally  low  ratio  of  passenger  traffic  to  freight  traffic,  sub- 
stantially understates  the  cost  of  the  passenger  train  services,  when  fig- 
ures derived  from  it  are  applied  to  an  entire  year. 

It  thus  becomes  evident  that  any  inquiry  which  takes  into  consider- 
ation the  necessary  elements  of  the  situation  will  demonstrate  that  rail- 
way mail  pay  is  too  low.  It  is  only  by  ignoring  essential  elements  of 
the  service  and  of  expense  and  the  fundamental  element  of  a  return  on 
the  value  of  the  property  that  any  argument  to  the  contrary  can  be 
constructed. 

Thus  the  mail  traffic  does  not  pay  its  operating  cost.  That  traffic 
is  a  substantial  percentage  of  the  total  public  service  performed  by  the 
railroads.  It  should  con-tribute  a  substantial  proportion  to  the  taxes 
which  the  railroads  have  to  pay  and  to  the  return  on  railroad  property 
which  its  owners  are  entitled  to  receive.  Clearly  no  fair  method  can  be 
devised  which  will  fail  to  show  that  the  existing  mail  pay  is  far  below 
a  fairly  compensatory  basis.  Certainly  this  condition  ought  not  to  be 
intensified  by  adding  the  injustice  of  still  further  reductions.  On  the 
contrary,  the  unjust  reductions  of  recent  years  should  be  corrected  for 
the  future,  and  the  railroads  should  be  relieved  from  the  strikingly 
unjust  methods  by  which  they  are  at  present  deprived  of  anything  ap- 
proaching fair  compensation. 

V.  THE  POSTMASTER-GENERAL'S  APPORTIONMENT 
01'  SPACE  BETWEEN  THE  MAIL  SERVICE  AND  THE  OTHER 
SERVICES  RENDERED  ON  PASSENGER  TRAINS  DID  NOT 
ALLOW  TO  THE  MAILS  THE  SPACE  WHICH  THEY  ACTU- 
ALLY REQUIRE  AND  USE  AND  THIS  HAD  THE  RESULT  OF 
UNDULY  REDUCING  HIS  ESTIMATES  OF  THE  COST  TO  THE 
RAILWAYS  OF  THE  MAIL  SERVICE. 

Detailed  reference  will  now  be  made  to  the  methods  and  controlling 
effect  of  the  Postmaster-General's  apportionment  of  passenger  train 
space  between  the  mails  and  the  other  services  rendered  on  passenger 
trains.  Such  an  apportionment  was  a  necessary  step  in  the  calculations 
reported  in  Document  No.  105.  Having  obtaine<J  certain  estimates  of 
the  cost  of  the  passenger  train  services,  considered  together,  by  methods, 
producing  the  lowest  results,  the  next  step  shown  in  Document  No.  105 
was  to  apportion  a  part  of  this  cost  to  the  mail  service.  The  accepted 
method  for  such  an  apportionment  is  to  distribute  the  total  cost  in  pro- 
portion to  the  train  space  required  by  each  of  the  respective  services. 
The  Postmaster-General  obtained  from  the  railways  statements  which 


he  might  have  used  in  applying  this  method  and  these  statements  showed 
that  9.32  per  cent,  of  the  total  space  in  passenger  trains  was  required  by 
the  mails,  but,  instead  of  using  the  data  showing  this  fact,  he  substituted 
figures  of  his  own  which  reduced  the  space  credited  to  the  mail  service 
to  7.16  per  cent,  of  the  total.  The  total  of  passenger  train  costs  which 
the  Postmaster-General  estimated  should  be  apportioned  among  pas- 
sengers, express  and  mail,  on  the  basis  of  space  occupied,  was 
$37,074,172.*  He  therefore  assigned  to  the  mail  service  7.16  per  cent,  of 
the  last-named  sum  or  $2,654,510.69.  If,  however,  he  had  used  the 
proportion  of  space,  9.32  per  cent.,  resulting  from  the  reports  he  had 
obtained  from  the  railways,  the  amount  apportioned  as  cost  of  the  mail 
service  for  the  month  would  have  been  $800,802  greater.  Multiplying 
this  by  twelve  gives  an  increase  in  the  estimated  annual  cost  of  over 
$9,600,000. 

Thus  the  Postmaster-General  arrived  at  his  declaration  that  the 
railways  were  getting  an  excess  profit  of  $9,000,000  by  means  of  two 
fundamental  errors,  omitting  for  the  present  reference  to  any  other 
errors.  He  understated  the  annual  mail  expenses  and  taxes  of  the  rail- 
ways by  at  least  $9,600,000,  and  he  ignored  entirely  the  necessary  return 
on  the  value  of  railroad  property. 

This  examination  of  his  methods  shows  that  the  determination  of 
space  was  of  primary  and  controlling  importance  and  that  the  changes  in 
space  allotment  have  destroyed  the  value  of  his  deductions.  These 
changes  were  due  to  his  refusal  to  assign  to  the  mail  service  the  working 
space  and  temporarily  unoccupied  space  on  trains,  which  were  necessary 
to  the  mail  service  and  to  his  actually  assigning  much  of  this  space  to 
the  passenger  service  rendered  on  the  same  trains. 

It  is  scarcely  necessary  to  note  that  all  kinds  of  traffic  require 
"working  space"  in  addition  to  the  space  actually  occupied  by  the  traffic 
itself,  and  that  this  is  especially  true  of  the  mail  traffic,  or  that  where 
there  is  a  preponderating  movement  of  a  certain  traffic  in  one  direction 
there  must  be  some  empty  space  on  account  of  that  traffic,  sometimes 
called  "dead"  space,  in  trains  moving  in  the  direction  of  lighter  traffic. 
Thus  passenger  cars  must  have  aisles,  vestibules  and  platforms,  and 
postal  cars  must  have  a  great  deal  of  space  in  which  to  sort  the  mails 
while,  for  mail  carried  in  baggage  cars,  there  must  be  space  in  which 
to  reach  the  pouches  and  to  receive  and  deliver  them  through  the  doors. 
A  through  train  must  also  have  the  full  capacity  required  for  the  max- 

*This  is  the  sum  which  was  apportioned  by  the  Postmaster  General  on  the 
basis  of  train  space  occupied.  He  estimated  $40,121,294.83  (Document  No.  105, 
page  280)  as  the  total  operating  expenses  and  taxes  of  the  passenger  train 
services  for  the  month.  Of  this  total  $21,993.06  was  charged  directly  to  the 
mails  and  $3,025,129.77  directly  to  the  other  passenger  train  services,  leaving 
the  sum  stated  in  the  text  to  be  apportioned  on  the  space  basis. 

10 


imum  traffic  of  any  kind  likely  to  seek  accommodation  on  any  part  of  its 
journey,  although  during  much  of  each  trip  the  actual  traffic  may  be 
considerably  below  this  limit.  The  Postmaster- General,  however,  refused 
to  credit  the  mail  service  with  much  of  the  space  thus  required  by  the 
Department  although  his  figures  for  the  other  passenger  train  services 
allowed  fully  for  all  such  space  required  by  them.  In  fact  in  many  cases 
such  space,  actually  required  by  the  mails  and  so  reported  by  the  railways, 
was  taken  from  the  total  mail  space  and,  without  reason,  assigned  to 
the  passenger  service.  These  modifications  of  the  data  correctly  reported, 
not  susceptible  of  justification  upon  any  sound  transportation  principle, 
were  carried  so  far  that  the  tabulations  of  the  Post  Office  Department, 
which  are  stated  for  railway  mail  routes  having  a  total  length  of 
194,977.55  miles*  show  only  926,164,459  "car-foot  miles"  made  in  the 
mail  service,  although  certain  railways,  included  therein,  and  having 
railway  mail  routes  aggregating  only  178,709.96  miles,  had  correctly 
reported  mail  space  equivalent  to  1,153,110,245  "car-foot  miles."  Thus, 
although  the  Department's  figures  cover  8.3  per  cent  more  mileage,  its 
reductions  of  space  resulted  in  assigning  to  this  greater  mileage  about 
one-quarter  (24.5  per  cent.)  less  mail  space.  At  the  same  time  the  De- 
partment actually  increased  the  space  assigned  to  the  other  passenger 
train  services,  its  figures  showing  12,014,065,506  car-foot  miles  in  these 
services  for  194,977.55  miles  of  mail  routes  which  must  be  compared 
with  11,222,478,739  car-foot  miles  reported  by  the  railways  for 
178,709.96  mail-route  miles. 

This  treatment  of  the  controlling  figures  as  to  space,  supplementing 
the  other  errors  of  method  and  omissions  of  fact,  which  have  been  or 
will  be  cited,  was  amply  sufficient  to  turn  a  real  loss  into  an  apparent 
profit. 

VI.  THE  POSTMASTER  -  GENERAL  IGNORED  DATA 
WHICH  HE  HAD  OBTAINED  SHOWING  EXPENDITURES  ON 
ACCOUNT  OF  THE  MAILS  LARGELY  IN  EXCESS  OF  THE 
DIRECT  EXPENSES  FOR  THAT  SERVICE  WHICH  HE  RE- 
PORTED. 

As  a  part  of  the  investigation  reported  in  Document  No.  105  the 
Postmaster-General  obtained  from  the  railways  statements  showing  the 
amounts  expended  by  them  for  the  station  and  terminal  services  required 
by  his  Department  and  the  amount  of  free  transportation  furnished  on 
his  requisition  for  officers  and  agents  of  the  postal  service  when  not  in 
charge  of  mail.  These  data  were  not  used  (Document  No.  105,  p.  6) 
and,  as  no  adequate  allowance  was  made  in  any  other  way  for  these  ex- 
penses, the  omission  unjustly  reduced  the  estimates  of  the  cost  to  the 

*  Document  No.  105,  p.  53. 

11 


railways  of  their  postal  services.  The  Postmaster-General's  explanation 
of  this  omission  implies  that  it  was  partially  offset  by  the  assignment  as 
cost  of  mail  service  of  its  proportion,  on  the  space  basis,  of  all  the  station 
and  terminal  expenses  of  the  passenger  train  services  but  these  special 
mail  expenses  are  disproportionately  heavy  and  the  amount  so  assigned 
was  far  too  low.  The  expenses  for  station  and  terminal  services  espe- 
cially incurred  for  the  mails,  during  November,  1909,  and  reported  to 
the  Postmaster-General,  for  ninety-two  per  cent,  of  the  mileage  covered 
by  Document  No.  105  aggregated  $401,136.00,  as  follows: 

Amount  of  wages  paid  to  messengers  and  porters 

employed  exclusively  in  handling  mails $79,980.84 

Portion  properly  chargeable  to  mail  service,  pro- 
rated on  basis  of  actual  time  employed,  of  wages 
paid  to  station  emplo}rees  a  part  of  whose  time 
is  employed  in  handling  mails 198,927.01 

Amount  expended  for  maintenance  of  horses  and 
wagons  and  for  ferriage,  etc.,  in  connection  with 
mail  service 5,640.98 

Rental  value,  plus  average  monthly  cost  of  light 
and  heat,  of  room  or  rooms  set  apart  for  the  ex- 
clusive use  of  the  mail  service 37,258.93 

Rental  value  of  tracks  occupied  daily  for  advance 

distribution  of  the  mail 47,029.12 

Average  monthly  cost  of  light  and  heat  for  postal 

cars  placed  daily  for  advance  distribution  of  mail     18,400.57 

Interest  at  the  legal  rate  upon  the  value  of  cranes, 

catchers  and  trucks  required  for  mail  service.  . .  .        3,895.36 


Total   -.  .$401,126.00* 

All  the  foregoing  data  were  reported  to  the  Postmaster-General  in 
response  to  his  request  but  he  made  no  use  of  these  items,  an  omission 
manifestly  to  the  serious  disadvantage  of  the  railways  and  having  the 
effect  of  unduly  reducing  his  estimates  of  the  cost  of  the  mail  service. 

Similarly,  the  Postmaster-General  omitted  to  use  the  data  he  had 
obtained  from  the  railways  showing  the  volume  of  free  passenger  trans- 
portation, already  referred  to,  supplied  to  the  officers  and  agents  of  the 
Post  Office  Department  and  his  estimates  contain  no  recognition  of  the 
cost  of  this  service  although  its  extent  should  be  a  matter  of  record  in 
the  Department  as  it  is  furnished  only  on  its  requisition.  The  space 

*  This  total  includes  $9,993.19  reported  by  four  companies  which  gave 
totals  for  these  items,  but  did  not  report  the  items  separately. 

12 


in  passenger  coaches  occupied  by  these  representatives  of  the  Post  Office 
Department,  traveling  free,  was  not  assigned  to  the  mail  service  but  was 
treated  as  passenger  space. 

VII.  THE  MONTH  OF  NOVEMBER  IS  NOT  A  FAIR 
AVERAGE  MONTH  IN  ANY  RAILWAY  YEAR  OR  ONE  THAT 
IS  TYPICAL  OF  A  YEAR'S  BUSINESS  AND  ITS  USE  AS  THE 
SOLE  BASIS  OF  THE  POSTMASTER-GENERAL'S  CALCULA- 
TIONS WAS  SO  UNFAVORABLE  TO  THE  RAILWAYS  AS  TO 
DEPRIVE  THE  RESULTS  OF  ANY  VALUE  EVEN  IF  IN  ALL 
OTHER  RESPECTS  HIS  METHODS  WERE  BEYOND  CRITI- 
CISM. 

All  the  Postmaster-General's  calculations,  reported  in  Document 
No.  105,  and  by  him  relied  upon  therein,  and  elsewhere,  to  substantiate 
his  attack  upon  existing  railway  mail  pay,  depend  solely  upon  data  for 
the  single  month  of  November,  in  the  year  1909.  It  is  obvious,  therefore, 
that  the  validity  of  his  conclusions,  if  all  the  rest  of  his  processes  were 
accurate  and  his  deductions  otherwise  sound,  would  depend  upon  whether 
November  is  sufficiently  typical  of  the  railway  year  to  be  safely  used  as 
the  sole  basis  for  conclusions  applicable  to  a  whole  year.  The  truth  is, 
however,  that  November  is  not  a  typical  or  average  month  and  that  all 
of  its  deviations  from  the  averages  of  the  year  are  such  as  greatly  to 
favor  the  result  which  the  Postmaster- General  was  seeking. 

It  may  well  be  doubted  whether  the  railway  year  contains  any 
month  that  can  properly  be  regarded  as  typical  of  the  whole  period  but 
if  it  does,  the  month  of  November,  with  four  Sundays,  two  holidays  and 
only  twenty-four  working  days,  is  certainly  not  such  a  month.  The 
Interstate  Commerce  Commission  publishes  the  monthly  aggregates  of 
railway  receipts  and  these  official  data  conclusively  prove  that  Novem- 
ber, 1909,  was  the  one  month  for  which  the  data  were  most  strongly 
favorable  to  finding,  by  the  Postmaster-General's  method,  an  abnormally 
low  apparent  cost  for  the  passenger  train  services  and,  consequently,  for 
the  mail  service. 

It  is  a  month  in  which  substantially  Winter  conditions  prevail  in 
a  large  part  of  the  country  and,  on  this  account,  one  during  which  much 
of  the  ordinary  work  of  maintenance  of  way  and  structures  must  be 
suspended.  Such  work  occasions  a  large  fraction  of  the  yearly  expenses  of 
all  railways  and  these  expenses  pertain  in  a  relatively  large  proportion  to 
the  passenger  services  because  the  higher  speed  of  passenger  trains  results 
in  greater  relative  wear  and  tear  upon  road-bed  and  structures  than  that 
caused  by  the  slower  trains  of  the  freight  service  and  the  requirements 
of  safety  to  passengers  carried  at  high  speed  impose  more  costly  stan- 
dards of  maintenance  than  would  otherwise  be  necessary.  Consequently 

13 


a  month  in  which  these  maintenance  expenses  are  necessarily  below 
the  yearly  average  cannot  typify  the  full  annual  cost  of  the  passenger 
train  services.  Figures  showing  the  facts  are  contained  in  Appendix  B. 

It  is,  of  course,  understood  that  the  respective  expenses  of  the  pas- 
senger and  freight  services  must  move  upward  and  downward  with  the 
fluctuations  in  the  volume  of  each  sort  of  traffic.  No  month  can  furnish 
a  reliable  basis  for  estimating  the  proportion  of  the  total  expenses  that 
is  caused  by  the  passenger  service  unless  during  that  month  the  volume 
of  passenger  traffic  bears  a  normal  relation  to  the  volume  of  freight 
traffic.  But  in  November,  1909,  as  will  appear  from  official  figures  for 
each  month  in  the  year  contained  in  Appendix  C,  passenger  traffic,  as 
measured  by  receipts  therefrom,  was  much  below  the  average  month  of 
the  year  while  freight  traffic  was  far  above  the  average.  The  November 
receipts  from  passengers  amounted  to  only  21.5  per  cent,  of  total  receipts, 
the  lowest  relation  shown  for  any  month  in  the  year.  Of  course,  under 
these  conditions  passenger  expenses  were  curtailed  and  freight  expenses 
relatively  enhanced.  Certainly  the  use  of  data  resulting  from  these  ab- 
normal relations  could  not  possibly  produce  results  fairly  typical  of  a 
normal  period,  that  is  of  a  whole  year.  The  results  so  obtained  must 
have  diminished  the  apparent  cost  of  the  passenger  train  services  below 
the  true  cost,  by  just  as  much  as  the  figures  for  November  were  below 
the  average  figures  of  the  year. 

These  considerations  fully  establish  the  truth  that,  if  every  other 
feature  of  Document  No.  105  were  absolutely  beyond  criticism,  the  fact 
that  it  rests  wholly  upon  estimates  based  upon  data  for  the  single  month 
of  November  would  render  its  conclusions  illusory,  misleading  and  seri- 
ously prejudicial  to  the  railways. 

VIII.  A  COMMISSION  OF  SENATORS  AND  MEMBERS 
OF  CONGRESS  WHICH,  BETWEEN  1898  AND  1901,  MOST 
FULLY  AND  CAREFULLY  INVESTIGATED  THE  SUBJECT, 
ASCERTAINED  AND  DECLARED  THAT  RAILWAY  MAIL  PAY 
WAS  NOT  THEtt  EXCESSIVE;  SINCE  THEN  THERE  HAVE 
BEEN  MANY  AND  EXTENSIVE  REDUCTIONS  IN  PAY  AC- 
COMPANIED BY  SUBSTANTIAL  INCREASES  IN  THE  COST 
AND  VALUE  OF  THE  SERVICES  RENDERED  BY  THE  RAIL- 
WAYS. 

The  Congressional  Joint  Commission  to  Investigate  the  Postal  Serv 
ice,  which  reported  on  January  14,  1901,  is  authority  for  the  fact  that,  at 
that  time,  railway  mail  pay  was  not  excessive.  Senator  William  B. 
Allison,  of  Iowa;  Senator  Edward  S.  Wolcott,  of  Colorado;  Senator 
Thomas  S.  Martin,  of  Virginia ;  Representative  Eugene  F.  Loud,  of  Cali- 
fornia; Representative  W.  H.  Moody,  of  Massachusetts,  and  Represen- 

14 


tative  T.  C.  Catchings,  of  Mississippi,  six  of  the  eight  members  of  the 
Commission,  then  united  in  the  following : 

"Upon  a  careful  consideration  of  all  the  evidence  and 
the  statements  and  arguments  submitted,  and  in  view  of 
all  the  services  rendered  by  the  railways,  we  are  of  the 
opinion  that  'the  prices  now  paid  to  the  railroad  com- 
panies for  the  transportation  of  the  mails'  are  not  exces- 
sive, and  recommend  that  no  reduction  thereof  be  made 
at  this  time."  Fifty-second  Congress,  Second  Session, 
Senate  Document  No.  89,  pp.  19,  22,  25,  29. 

Since  the  Commission  reported,  the  volume  of  the  American  mails, 
the  revenue  of  the  American  postal  service  and  its  demands  upon  the 
railways  for  services  and  facilities  have  greatly  increased.  The  costs  of 
supplying  railway  transportation  have  also  greatly  increased.  The  neces- 
sary cost  of  railway  property  per  unit  of  service  has  increased,  and  in 
consequence  the  amount  required  as  a  reasonable  return  thereon,  on 
account  of  higher  wages  and  prices,  the  higher  standards  of  service 
demanded  and  the  higher  value  of  the  real  estate  required  for  extended 
and  necessary  terminal  plants.  Operating  expenses  have  grown  by 
reason  of  repeated  advances  in  rates  of  wages  paid  to  employees  of  every 
grade  and  increased  prices  of  materials  and  supplies.  Taxes  have  in- 
creased with  the  rapidly  augmenting  exactions  of  State  and  local  govern- 
ments and  the  imposition  of  an  entirely  new  Federal  corporation  tax.* 
Yet  during  this  period  of  rapidly  advancing  railway  expenses,  and  in 
spite  of  the  fact  that  at  its  commencement  the  railway  mail  pay  was  not 
excessive,  the  rates  of  payment  for  railway  mail  services  have  been  sub- 
jected to  repeated  and  drastic  decreases  accomplished  both  by  legislative 
action  and  by  administrative  orders.  These  reductions  have  so  much 
more  than  offset  the  rather  doubtful  advantages  which  the  railways 
might  be  assumed  to  have  obtained  from  the  increased  volume  of  mail 
traffic  that  in  1912  they  find  their  mail  service  more  unprofitable  than 
ever  before.  The  following  table  shows  the  facts: 


Fiscal 
Year 

Total  railway 
mail  pay 

Average     railway     mail 
pay  per  $100.00  of 
postal  receipts. 

1901 

$38,158,969 

$34.18 

1904 

43,971,848 

30.62 

1907 

49,758,071 

27.10 

1910 

49,405,311 

22.04 

1911 

50,583,123 

21.26 

*  Data  indicating  some  of  the  increases  in  wages  and  taxes  are  given  in 
Appendices  D  and  E. 

15 


The  foregoing  shows  that  the  Post  Office  Department  expended  for 
railway  transportation,  in  1901,  $34.18  in  order  to  earn  $100.00  in  gross 
and  that  by  1911  this  expenditure  had  been  reduced  37.8  per  cent,  to 
$21.26. 

This  notable  reduction  was  the  consequence  (first)  of  the  operation 
of  the  law  fixing  mail  pay  under  which  the  average  payment  per  unit  of 
service  decreases  as  the  volume  of  mail  increases;  (second)  of  the  Acts 
of  Congress  of  March  2,  1907,  and  May  12,  1910,  and  (third)  of  admin- 
istrative changes  effected  by  the  Post  Office  Department  which,  without 
decreasing  the  services  required  of  the  railways  or  enabling  those  services 
to  be  rendered  at  any  lower  cost,  greatly  reduced  the  payment  therefor. 
Chief  among  these  administrative  changes  was  the  Postmaster-General's 
order  known  as  the  "Divisor"  order  (No.  412  of  June  7,  1907,  super- 
seding Order  No.  165  of  March  2,  1907)  radically  lowering  the  basis 
for  calculating  the  annual  payments  for  transportation.  No  official 
estimate  of  the  reduction  in  the  aggregate  annual  payment  produced 
by  the  operation  of  the  law  fixing  the  scheme  of  payment  has  been  made 
but  from  time  to  time  the  Department  has  published  estimates  of  the 
reductions  otherwise  effected.  None  of  these  estimates  is  now  up  to  date, 
and  to  make  them  comparable  with  the  present  volume  of  mail  sub- 
stantial increases  would  be  necessary,  but  they  are  given  below  as  repre- 
senting an  amount  substantially  less  than  the  lowest  possible  statement 
of  the  total  present  annual  reduction. 

Cause  of  reduction  Amount  of  annual  reduction. 

Natural  operation  of  the  law No  estimate. 

Acts  of  March  2,  1907,  and  May  12,  1910 $2,723,658.90 

Withdrawal  of  pay  for  special  facilities 167,005.00 

Postmaster-General's  divisor  order 4,941,940.34 

Other  administrative  changes 699,544.51 


Total  (with  no  allowance  for  the  first  item 
above) $8,532,148.75 

No  one  will  contend  for  a  moment  that  there  has  been  any  net 
reduction  in  the  cost  of  supplying  railway  mail  services  and  facilities 
since  1901,  the  year  in  which  the  report  of  the  Joint  Commission  to 
Investigate  the  Postal  Service  was  made.  In  fact,  all  changes  in  railway 
operating  costs,  except  those  due  to  increased  efficiency  of  organization 
and  management,  which  can  have  little  if  any  effect  in  connection  with 
mail  traffic,  have  been  in  the  opposite  direction.  During  the  years  charac- 
terized by  these  reductions  the  railways  have  been  called  upon  contin- 
ually to  improve  the  character  of  their  postal  service  and  the  Post  Office 
Department  will  not  deny  that  the  railways  are  now  rendering  better, 
more  frequent,  and  more  expeditious  postal  service  than  in  1901,  or 

16 


any  intermediate  year,  and  are  doing  so  at  greatly  increased  cost  to  them- 
selves. 

In  view  of  these  thoroughly  substantiated  facts  the  drastic  reduc- 
tions of  recent  years  afford  unanswerable  proof  that  railway  mail  pay 
is  now  too  low. 

IX.  THE  ADMINISTRATION  OF  THE  POST  OFFICE  DE- 
PARTMENT HAS  NOT,  IN  THE  LAST  TWELVE  YEARS,  EF- 
FECTED ANY  REDUCTION  IN  THE  ANNUAL  TOTAL  OF  ITS 
EXPENSES  FOR  OTHER  PURPOSES  THAN  RAILWAY  TRANS- 
PORTATION OR  IN  THE  PROPORTION  OF  ITS  REVENUES 
REQUIRED  FOR  SUCH  OTHER  EXPENSES,  BUT  THE 
WHOLE  SAVING  WHICH  HAS  NEARLY  ELIMINATED  THE 
ANNUAL  DEFICIT  OF  THE  DEPARTMENT  IS  REPRESENTED 
BY  THE  REDUCED  PAYMENT  S,  PER  UNIT  OF  SERVICE,  TO 
THE  RAILWAYS. 

That  the  recent  savings  of  the  postal  service  have  been  wholly  at 
the  expense  of  the  railways  is  shown  by  the  following: 

1901.  1911. 

Postal  gross  receipts $111,631,193  $237,879,823 

Postal    expenses,    all    purposes; 

Total   $115,554,921  $238,507,669 

Per  cent,  of  gross  receipts 103.5  100.3 

Railway  mail  pay; 

Total   $38,158,969  $50,583,123 

Per  cent,  of  gross  receipts.  . . .            34.2  21.3 

Postal  expenses  other  than  rail- 
way mail  pay; 

Total   '..   $77,395,952  $187,924,546 

Per  cent,  of  gross  receipts. . . .            69.3  79.0 

This  table  shows  that  in  the  ten  years  from  1901  to  1911  the  Post 
Office  Department  reduced  its  operating  ratio  between  its  total  expenses 
and  its  gross  receipts  from  103.5  per  cent,  to  100.3  per  cent.,  being  a 
reduction  of  3.2  points;  but  it  also  shows  that  this  improvement  was 
due  solely  to  the  fact  that  the  ratio  of  railway  mail  pay  expenses  to  gross 
receipts  was  reduced  from  34.2  per  cent,  to  21.3  per  cent.,  a  reduction 
of  12.9  points,  while  the  ratio  of  all  other  expenses  to  gross  receipts 
increased  from  69.3  per  cent,  to  79  per  cent.,  an  increase  of  9.7  points. 
Thus  the  improvement  of  3.2  points  in  the  ratio  for  all  expenses  was  due 
entirely  to  the  greatly  reduced  ratio  of  railway  mail  pay,  the  heavy  re- 
duction in  that  respect  exceeding  by  3.2  points  the  very  substan- 
tial increase  in  the  ratio  of  all  other  expenses. 


During  the  ten  years  from  1901  to  1911  the  Department  took  up 
an  enormous  increase  in  business  at  a  greatly  decreased  cost  for  railway 
transportation  and  at  a  largely  increased  cost  for  other  purposes.  It 
cost  the  Department,  for  purposes  other  than  railway  transportation, 
nearly  nine-tenths  of  $126,248,630  to  add  that  amount  to  its  gross  re- 
ceipts (although  for  these  other  purposes  it  had  previously  spent  less 
than  seven-tenths  of  its  gross  receipts)  while  it  required  less  than  one- 
tenth  of  the  same  sum  to  pay  for  the  added  railway  transportation  that 
the  new  business  required  (although  at  the  beginning  of  the  period 
railway  transportation  had  cost  more  than  one-third  of  the  gross  re- 
ceipts). This  startling  comparison  fully  warrants  the  conclusion  that 
the  power  of  Congress  and  the  Department  has  been  exercised  to  force 
upon  the  railways,  by  reducing  the  payments  for  their  services,  the 
burden  not  only  of  the  effort  to  eliminate  the  annual  postal  deficit  but 
of  considerable  increases  in  other  forms  of  postal  expenditure.  No  ref- 
erence to  rural  free  delivery  will  serve  to  explain  away  the  conclusion 
suggested  by  this  comparison  especially  since  only  a  fraction  of  the  cost 
of  that  service  represents  really  an  additional  net  outlay.  This  service 
has  permitted  a  reduction  of  one-third  in  the  number  of  post  offices  and 
has  been  in  many  cases  substituted  for  star  route  service  and  the  savings 
thus  permitted  ought  to  be  credited  to  it  before  determining  its  cost. 

That  increases  in  postal  expenditures  were  necessary,  between  1901 
and  1911,  is  not  denied.  The  period  was  one  in  which  steady  and  exten- 
sive increases  in  the  cost  of  living  made  necessary  considerable  increases 
in  the  salaries  of  postal  employees  and  in  the  cost  of  postal  supplies, 
precisely  as  the  railways  were  impelled  to  increase  the  salaries  and  wages 
of  their  employees  and  were  obliged  to  pay  higher  prices  for  their  sup- 
plies. In  other  words,  the  purchasing  power  of  the  American  dollar, 
and  of  standard  money  everywhere,  greatly  decreased  and  this  decrease 
affected  the  Post  Office  Department  as  it  has  affected  every  business 
undertaking.  But  the  purchasing  power  of  the  railway  dollar  decreased 
exactly  as  that  of  all  other  dollars  and  it  was  unreasonable  and  unjust 
that  while  this  change  was  in  progress,  the  losses  which  it  entailed  in 
the  postal  service  of  the  Government  should  be  shifted,  as  it  has  been 
shown  that  they  were,  to  the  railways  which  were,  at  the  same  time, 
suffering  far  greater  losses  from  the  same  cause. 

X.  THE  CONTINUOUS  REFUSAL  OF  THE  POST  OFFICE 
DEPARTMENT  TO  ORDER  REWEIGHINGS  OF  THE  MAILS 
EXCEPT  AFTER  THE  MAXIMUM  INTERVAL  OF  FOUR 
YEARS  WHICH  THE  LAW  ALLOWS,  THE  DEMANDS  FOR  STA- 
TION AND  TERMINAL  SERVICES  THAT  ARE  RENDERED 
WITHOUT  ANY  OR  WITHOUT  ADEQUATE  COMPENSATION 
AND  THE  UNJUST  DISCRIMINATION  AGAINST  COMPART- 

18 


MENT  CARS  USED  AS  RAILWAY  POST  OFFICES  ARE  ALL 
ABUSES, SERIOUSLY  INJURIOUS  TO  THE  RAILWAYS,  WHICH 
HAVE  GROWN  UP  UNDER  THE  PRESENT  SYSTEM  OF  PAY- 
MENT AND  OUGHT  AT  ONCE  TO  BE  REMEDIED. 

In  addition  to  the  inadequacies  in  the  rates  of  pay  provided  under 
the  present  law,  which  result  in  payments  that  do  not  leave  any  balance 
for  taxes  or  return  upon  property  and  indeed  do  not  even  meet  oper- 
ating expenses,  there  are  certain  conditions  which  have  grown  up  in 
the  application  of  the  existing  basis  of  pay  that  ought  to  be  rectified. 
This  is  especially  necessary  in  view  of  the  tendency,  herein  shown,  of 
the  Post  Office  Department  to  apply  the  system  so  as  to  reduce  its  ex- 
pense for  railway  transportation,  and  to  look  to  this  item  as  the  chief 
or  sole  source  of  economies. 

The  transportation  pay  received  for  each  railway  route  is  deter- 
mined, under  the  practice  of  the  Department,  for  a  period  of  four  years 
on  the  basis  of  the  average  daily  weight  carried  during  a  period  of 
about  three  months  duration  prior  to  the  beginning  of  the  period  for 
which  it  is  fixed.  Thus,  by  the  terms  of  the  law,  the  Government  upholds 
the  principle  that  weight  should  be  the  basis  of  payment  but,  by 
an  inconsistent  practice,  denies  that  principle  and  creates  a  condition 
under  which  it  is  practically  certain  that  the  weight  actually  carried 
will  differ  materially  from  the  weight  paid  for.  Congress,  surely,  never 
intended  this  result  for  the  provision  of  law  is,  merely,  that  the  mail 
shall  be  weighed  "not  less  frequently"  than  once  in  four  years  and  clearly 
implies  an  intention  that  it  should  be  weighed  whenever  a  substantial 
change  in  volume  has  taken  place.  But  the  Post  Office  Department 
controls,  subject  to  the  provision  of  law,  the  frequency  of  the  weighings, 
and  naturally  seeks  those  reductions  in  its  expenses  which  can  be  effected 
without  loss  anywhere  except  in  railway  revenues.  Consequently,  it  long 
ago  ceased  to  order  new  weighings,  except  when  compelled  to  do  so  by 
the  expiration  of  the  statutory  limit.  It  thus  happens  that  while  the 
railways  are  paid  on  the  basis  of  a  certain  average  daily  weight  they  are 
frequently  carrying  a  much  greater  weight  and  with  no  compensation 
whatever  for  the  increase  in  the  weight.  In  other  instances  the  change 
is  in  the  opposite  direction  but  with  increasing  national  population  and 
wealth  it  is  obvious  that  most  of  these  changes  must  be  to  the  injury 
of  the  railways.  However,  the  element  of  uncertainty  thus  introduced 
into  each  contract  is  unbusinesslike  and  in  fairness  to  both  parties  ought 
to  be  removed.  No  railway  would  make  a  four  years'  contract  to  carry, 
for  a  definite  sum,  the  unlimited  output  of  any  manufacturing  plant 
and  if  it  attempted  to  do  so  the  contract  would  be  void  under  the  Inter- 
state Commerce  law.  The  terms  of  the  mail  contracts  are  substantially 

19 


dictated  by  the  Postmaster-General  and  by  Congress  and  the  latter 
ought,  in  justice  both  to  the  railways  and  to  the  Government,  to  require 
the  former  to  make  annual  weighings  in  order  that  the  scheme  of  pay- 
ment provided  in  the  law  may  be  fairly  and  accurately  applied. 

Eailways  are  required  to  transfer  the  mails  between  their  stations 
and  all  post  offices  not  more  than  a  quarter  of  a  mile  distant  from  the 
former  and,  at  the  election  of  the  Post  Office  Department,  to  make 
similar  transfers  at  terminals.  For  the  former  no  compensation  is 
accorded,  and  for  the  latter  the  allowances  are  inadequate.  There  are 
numerous  instances  in  which  these  extra  services  require  expenditures, 
on  the  part  of  the  railways  concerned,  that  exceed  the  total  compensation 
of  the  mail  routes  on  which  they  occur.  The  extent  of  these  require- 
ments in  particular  cases  is  largely  subject  to  the  will  of  the  Department 
and  this  produces  unreasonable  uncertainties  as  to  what  may  be  de- 
manded during  the  life  of  any  contract.  The  basis  of  payment  plainly 
does  not  contemplate  such  services,  they  are  a  survival  from  the  period 
when  the  mails  were  carried  by  stage-coaches,  which  could  readily 
deviate  these  distances  from  their  ordinary  routes,  and  it  is  clear  that 
the  Government  ought  to  perform  these  services  itself  or  reasonably 
compensate  the  railways  therefor. 

Much  of  the  mail  moved  by  the  railways  is  carried  in  cars  especially 
equipped  as  traveling  post  offices  in  order  that  it  may  be  accompanied  by 
postal  clerks  who  perform,  on  the  journey,  precisely  the  labor  which 
they  would  otherwise  perform  in  local  post  offices.  Cars  so  used  can  be 
but  lightly  loaded  and  are  costly  to  supply,  to  equip,  to  maintain  and  to 
move.  Their  use  has  greatly  increased  the  efficiency  of  the  postal  service 
and  vastly  expedited  the  handling  of  the  mails.  In  the  infancy  of  this 
service  Congress  provided  for  additional  payments  for  the  full  cars  so 
required,  but  when  the  practice  of  requiring  portions  of  cars  for  the 
same  identical  purpose  was  inaugurated  no  provision  for  paying  for 
them  was  made  and  this  condition  never  has  been  corrected.  Even  in 
Document  Njo.  105,  the  injustice  of  this  situation  is  recognized  (page 
3)  and  the  Postmaster-General  asserts  that  it  is  a  purely  arbitrary 
discrimination  and  without  logical  basis.  Obviously  a  reasonable  allow- 
ance for  apartment  cars  ought  to  be  made. 

XI.  THE  POSTMASTER-GENERAL'S  PROPOSED  PLAN 
OF  PAYMENT  BASED  UPON  OPERATING  COST  AND  TAXES, 
TO  BE  ASCERTAINED  BY  THE  POST  OFFICE  DEPARTMENT, 
PLUS  SIX  PER  CENT.  IS  SERIOUSLY  WRONG  IN  PRINCIPLE 
AND  WOULD  ENCOURAGE  AND  PERPETUATE  INJUSTICE. 

The  foregoing  discussion  makes  plain  the  error  and  injustice  in  the 
Postmaster-General's  proposal  to  pay  the  railways  for  carrying  the  mail 

20 


upon  the  basis  of  returning  to  them  the  operating  expenses  and  taxes, 
as  ascertained  by  the  Post  Office  Department,  attributable  to  the  car- 
riage of  the  mails,  plus  six  per  cent,  of  the  sum  of  these  expenses  and 
taxes. 

The  discussion  under  heading  III  above  demonstrates  that  the  plan 
leaves  out  of  consideration  any  allowance  for  return  upon  the  property 
and  would  be  destructive  of  the  universally  recognized  rights  of  the 
railroad  companies. 

Furthermore,  such  a  plan  is  fundamentally  erroneous  because  it 
involves  paying  the  highest  rates  to  the  railroad  that  by  reason  of 
physical  disabilities  or  inefficient  methods  is  most  expensively  operated 
and  the  lowest  rates  to  the  railroad  which,  by  reason  of  the  highest 
efficiency,  operates  at  the  lowest  cost.  A  railroad's  superior  operating 
efficiency  is  frequently  due  to  exceptionally  heavy  capital  expenditures 
to  obtain  low  grades,  two,  three  or  four  main  tracks,  and  to  improve-  in 
other  respects  the  roadbed  and  tracks  to  the  end  that  trains  may  be 
hauled  at  the  lowest  expense.  Such  a  railroad  needs,  and  is  entitled 
to  sufficient  net  earnings  to  enable  it  to  pay  a  proper  return  upon  the 
increased  value  which  is  due  to  such  expenditures.  But  under  the  Post- 
master-General's plan,  a  railroad  would  be  penalized  for  all  the  capital 
expenditures  made  by  it  for  the  purpose  of  decreasing  its  operating  cost, 
because  the  more  it  decreased  its  operating  cost  the  more  it  would  de- 
crease its  mail  pay. 

The  ascertainment  of  the  cost  to  a  railroad  of  conducting  mail 
service  is  necessarily  very  largely  a  matter  of  judgment  and  opinion, 
because  a  large  proportion  of  the  total  operating  expenses  are  com- 
mon to  the  freight  and  passenger  traffic  and  can  only  be  approx- 
imately apportioned.  There  is  room  for  a  very  wide  discretion  in  the 
making  of  such  apportionments.  It  would  not  be  right  or  proper  to 
entrust  the  Post  Office  Department  with  the  discretion  of  making  such 
apportionment,  because  the  Post  Office  Department  has  an  obvious  in- 
terest at  stake,  its  object  always  being  to  reduce  the  railroad  pay  to 
a  minimum. 

The  last  preceding  statement  is  fully  justified  by  the  facts  disclosed 
by  the  foregoing  pages,  which  show  how  consistently  the  Post  Office 
Department  has  relied  upon  reductions  in  railway  mail  pay  as  the  ever 
available  source  of  desired  curtailments  of  expenses  and  how  unsuccess- 
fully the  railways  have  resisted  this  persistent  pressure.  They  show 
that  successive  Postmasters-General  have  taken  advantage  of  every  legal 
possibility,  such  as  taking  the  longest  time  between  mail  weighings 
which  the  law  permits  and  the  strained  interpretation  of  the  statute 
fixing  the  basis  of  payment  (page  19),  in  order  to  effect  reductions 

21 


in  railway  mail  pay.  Consequently,  the  facts  point  irresistibly  to  one 
conclusion,  namely,  that  the  Post  Office  Department  is  a  bureaucratic 
entity  with  an  interest  in  the  reduction  of  the  amounts  paid  to  the  rail- 
ways that  is  incompatible  with  an  impartial  ascertainment  of  what  is 
fair  compensation.  This  interest,  coupled  with  the  brief  tenure  of  the 
responsible  officers  of  the  Department,  must  always  incline  the  latter  to 
support  insufficient  standards  of  mail  pay  and  prevent  their  recognizing 
the  ultimate  necessity  of  paying  fairly  for  efficient  service.  It  would, 
therefore,  be  clearly  inexpedient  and  strikingly  unjust  to  place  railway 
mail  revenues  wholly  at  the  mercy  of  the  Department  by  enacting  a  law 
which  would  authorize  each  Postmaster-General  to  fix  railway  mail  pay 
on  the  basis  of  his  own  inquiries  and  opinions  in  a  field  in  which  so  much 
must  be  left  to  estimate  and  approximation  as  that  of  the  relative  or 
actual  cost  of  the  different  kinds  of  railway  service. 

It  is  conceded  that  every  railway  mail  contract  is  between  the 
Government,  which  is  the  sovereign,  and  a  citizen,  and  that  the  nature 
and  terms  of  the  contract  are  always  substantially  to  be  dictated  by  the 
former.  But  this  very  condition  invokes  the  principle  of  primary  justice, 
that  the  sovereign  shall  take  care  to  exercise  its  power  without  oppres- 
sion. To  this  end  the  determination  of  the  terms  on  which  the  Post 
Office  Department  may  have  the  essential  services  of  the  railways  ought 
to  be  reserved,  as  at  least  partially  in  the  past,  to  the  Congress,  or,  if 
delegated  at  all,  they  should  be  entrusted  to  some  bureau  or  agency 
of  Government  not  directly  and  immediately  interested  in  reducing 
railway  mail  pay  below  a  just  and  reasonable  compensation. 


APPENDIX  A. 
EXTRACTS  FROM  THE  POSTAL  LAWS  AND  REGULATIONS. 

"Railroad  companies,  at  stations  where  transfer  clerks  are  em- 
ployed, will  provide  suitable  and  sufficient  rooms  for  handling  and 
storing  the  mails,  and  without  specific  charge  therefor.  These  rooms 
will  be  lighted,  heated,  furnished,  supplied  with  ice  water,  and  kept  in 
order  by  the  railroad  company."  Section  1186,  second  paragraph. 

"The  specific  requirements  of  the  service  as  to  ...  space 
required  ...  at  stations,  fixtures,  furniture,  etc.,  will  at  all  times 
be  determined  by  the  Post  Office  Department  and  made  known  through 
the  General  Superintendent  of  Railway  Mail  Service."  Section  1186, 
third  paragraph. 

"Railroad  companies  will  require  their  employees  who  handle  the 
mails  to  keep  a  record  of  all  pouches  due  to  be  received  or  dispatched 
by  them,  and  to  check  the  pouches  at  the  time  they  are  received  or  dis- 
patched, except  that  no  record  need  be  kept  of  a  single  pouch  from  a 
train  or  station  to  the  post  office  or  from  the  post  office  to  a  train  or 
station  which,  in  regular  course,  is  the  only  pouch  in  the  custody  of  the 
company's  employees  at  that  point  while  it  is  being  handled  by  them. 
This  is  not  to  be  construed  as  relieving  railroad  companies  from  having 
employees  on  trains  keep  and  properly  check  a  record  of  all  closed  pouches 
handled  by  them,  without  exception."  Section  1187,  first  paragraph. 

"In  case  of  failure  to  receive  any  pouch  due,  a  shortage  slip  should 
be  made  out,  explaining  cause  of  failure,  and  forwarded  in  lieu  of  the 
missing  pouch.  Specific  instructions  in  regard  to  the  use  of  shortage 
slips  will  be  given  by  the  General  Superintendent  of  Railway  Mail  Serv- 
ice." Section  1187,  second  paragraph. 

"Every  irregularity  in  the  receipt  and  dispatch  of  mail  should  be 
reported  by  the  employee  to  his  superintendent  promptly,  and  if  a 
probable  loss  of  or  damage  to  mail  is  involved,  or  if  the  cause  of  failure 
to  receive  a  pouch  is  not  known,  the  report  should  be  made  by  wire,  and 
the  superintendent  will  notify  the  division  superintendent  of  Railway 
Mail  Service  without  delay.  A  copy  of  the  employee's  report  should  be 
attached  to  and  become  a  part  of  the  permanent  pouch  record."  Section 
1187,  third  paragraph. 


"Train  pouch  records  will  be  kept  on  file  at  the  headquarters  of 
division  superintendents  of  railroad  companies  for  at  least  one  year  im- 
mediately following  the  date  the  mail  covered  by  them  was  handled,  and 
shall  be  accessible  there  to  post  office  inspectors  and  other  agents  of  the 
Post  Office  Department.  Station  pouch  records  will  be  kept  on  file  at  the 
station  to  which  they  apply  for  at  least  one  year  immediately  following 
the  date  the  mail  covered  by  them  was  handled,  and  shall  be  accessible 
there  to  post  office  inspectors  and  other  agents  of  the  Post  Office  De- 
partment." Section  1187,  fourth  paragraph. 

"Kailroad  companies  will  require  their  employees  to  submit  pouch 
records  for  examination  to  post  office  inspectors  and  other  duly  accredited 
agents  of  the  Post  Office  Department  upon  their  request  and  exhibition 
of  credentials  to  such  employees."  Section  1187,  fifth  paragraph. 

"Every  railroad  company  is  required  to  take  the  mails  from,  and 
deliver  them  into,  all  terminal  post  offices,  whatever  may  be  the  distance 
between  the  station  and  post  office,  except  in  cities  where  other  provision 
for  such  service  is  made  by  the  Post  Office  Department.  In  all  cases 
where  the  Department  has  not  made  other  provision,  the  distance  between 
terminal  post  office  and  nearest  station  is  computed  in,  and  paid  for, 
as  part  of  the  route."  Section  1191,  first  paragraph. 

"The  railroad  company  must  also  take  the  mails  from  and  deliver 
them  into  all  intermediate  post  offices  and  postal  stations  located  not 
more  than  eighty  rods  from  the  nearest  railroad  station  at  which  the 
company  has  an  agent  or  other  representative  employed,  and  the  com- 
pany shall  not  be  relieved  of  such  duty  on  account  of  the  discontinuance 
of  an  agency  without  thirty  days'  notice  to  the  Department."  Section 
1191,  second  paragraph. 

"At  connecting  points  where  railroad  stations  are  not  over  eighty 
rods  apart  a  company  having  mails  on  its  train  to  be  forwarded  by  the 
connecting  train  will  be  required  to  transfer  such  mails  and  deliver 
them  into  the  connecting  train,  or,  if  the  connection  is  not  immediate,  to 
deliver  them  to  the  agent  of  the  company  to  be  properly  dispatched  by 
the  trains  of  said  company."  Section  1192. 

"At  places  where  railroad  companies  are  required  to  take  the  mails 
from  and  deliver  them  into  post  offices  or  postal  stations  or  to  transfer 
them  to  connecting  railroads,  the  persons  employed  to  perform  such 
service  are  agents  of  the  companies  and  not  employees  of  the  postal  serv- 
ice, and  need  not  be  sworn ;  but  such  persons  must  be  more  than  sixteen 
years  old  and  of  suitable  intelligence  and  character.  Postmasters  will 
promptly  report  any  violation  of  this  requirement."  Section  1193. 

24 


"Where  it  is  desirable  to  have  mails  taken  from  the  post  office  or 
postal  station  to  train  at  a  terminal  point  where  the  terminal  service  de- 
volves upon  the  company,  in  advance  of  the  regular  time  of  closing  mails, 
the  company  will  he  required  to  make  such  advance  delivery  as  becomes 
necessary  by  the  requirements  of  the  service."  Section  1194. 

"When  a  messenger  employed  by  the  Post  Office  Department  cannot 
wait  for  a  delayed  train  without  missing  other  mails  the  railroad  com- 
pany will  be  required  to  take  charge  of  and  dispatch  the  mails  for  the 
delayed  train,  and  will  be  responsible  for  the  inward  mail  until  delivered 
to  the  messenger  or  other  authorized  representative  of  the  Department." 
Section  1195. 

"Whenever  the  mail  on  any  railroad  route  arrives  at  a  late  hour  of 
the  night  the  railroad  company  must  retain  custody  thereof  by  placing 
the  same  in  a  secure  and  safe  room  or  apartment  of  the  depot  or  station 
until  the  following  morning,  when  it  must  be  delivered  at  the  post  office, 
or  to  the  mail  messenger  employed  by  the  Post  Office  Department,  at 
as  early  an  hour  as  the  necessities  of  the  post  office  may  require."  Sec- 
tion 1196. 

"When  a  train  departs  from  a  railroad  station  in  the  night  time 
later  than  9  o'clock,  and  it  is  deemed  necessary  to  have  the  mail  dis- 
patched by  such  train,  the  division  superintendent  of  Railway  Mail 
Service  will,  where  mail  is  taken  from  and  delivered  into  the  post  office 
by  the  railroad  company,  request  the  company,  or  where  a  mail  messen- 
ger or  carrier  is  employed  by  the  Post  Office  Department,  will  direct  him, 
to  take  the  mail  to  the  railroad  station  at  such  time  as  will  best  serve 
the  interest  of  the  mail  service.  Such  mail  will  be  taken  charge  of  by 
the  agent  or  other  representative  of  the  railroad  company,  who  will 
be  required  to  keep  it  in  some  secure  place  until  the  train  arrives,  and 
then  see  that  it  is  properly  dispatched."  Section  1197,  first  paragraph. 

"The  division  superintendent  of  Railway  Mail  Service  will  give 
reasonable  advance  notice  to  the  proper  officer  of  the  railroad  company, 
in  order  that  the  agent  or  representatives  of  the  company  may  be  prop- 
erly instructed/''  Section  1197,  second  paragraph. 

"Railroad  companies  will  be  expected  to  place  their  mail  cars  at 
points  accessible  to  mail  messengers  or  contractors  for  wagon  service. 
If  cars  are  not  so  placed  the  companies  will  be  required  to  receive  the 
mails  from  and  deliver  them  to  the  messengers  or  contractors  at  points 
accessible  to  the  wagon  of  the  messenger  or  contractor."  Section  1198. 

25 


"A  mail  train  must  not  pull  out  and  leave  mails  which  are  in 
process  of  being  loaded  on  the  car  or  which  the  conductor  or  trainman 
has  information  are  being  trucked  from  wagons  or  some  part  of  the 
station  to  the  cars/'  Section  1199. 

"At  all  points  at  which  trains  do  not  stop  where  the  Post  Office 
Department  deems  the  exchange  of  mails  necessary,  a  device  for  the  re- 
ceipt and  delivery  of  mails  satisfactory  to  the  Department  must  be 
erected  and  maintained;  and  pending  the  erection  of  such  device  the 
speed  of  trains  must  be  slackened  so  as  to  permit  the  exchange  to  be 
made  with  safety."  Section  1200,  first  paragraph. 

"In  all  cases  where  the  Department  deems  it  necessary  to  the  safe 
exchange  of  the  mails  the  railroad  company  will  be  required  to  reduce 
the  speed  or  stop  the  train."  Section  1200,  second  paragraph. 

"When  night  mails  are  caught  from  a  crane  the  railroad  company 
must  furnish  the  lantern  or  light  to  be  attached  to  the  crane  and  keep 
the  same  in  proper  condition,  regularly  placed  and  lighted;  but  if  the 
company  has  no  agent  or  employee  at  such  station,  the  company  must 
furnish  the  light,  and  the  care  and  placing  of  same  will  devolve  upon 
the  Department's  carrier."  Section  1200,  third  paragraph. 

"The  engineer  of  a  train  shall  give  timely  notice,  by  whistle  or  other 
signal,  of  its  approach  to  a  mail  crane."  Section  1200,  fourth  paragraph. 

"Kailroad  companies  are  required  to  convey  upon  any  train,  with- 
out specific  charge  therefor,  all  mail  bags,  post  office  blanks,  stationery, 
supplies,  and  all  duly  accredited  agents  of  the  Post  Office  Department 
and  post  office  Inspectors  upon  the  exhibition  of  their  credentials."" 
Section  1184. 


26 


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28 


APPENDIX  D. 
.  HOW  KAILWA Y  WAGES  HAVE  INCREASED. 

In  the  year  1901  the  railways  reporting  to  the  Interstate  Com- 
merce Commission  received,  in  gross  from  operating  sources,  the  sum  of 
$1,588,526,037.00  and  expended  in  wages  and  salaries  the  sum  of  $610,- 
713,701.00;  in  1910  the  corresponding  totals  were  $2,750,667,435.00  and 
$1,143,725,306.00.  Computations  from  these  totals  show  that  in  1901 
the  railways  expended  in  wages  and  salaries  $38.45  out  of  each  $100.00 
of  gross  operating  receipts,  while  in  1910  the  proportion  had  increased 
to  $41.58  a  difference  of  $3.13  in  each  $100.00  of  gross  receipts.  This 
difference  does  not  seem  small  but  it  is  hardly  realized,  except  when  the 
calculation  is  made,  that  on  the  basis  of  the  gross  receipts  of  1910  it 
would  amount,  as  it  does,  to  an  additional  expense  of  $86,095,890.72.  It 
is  to  be  borne  in  mind  that  this  largely  increased  payment  to  labor  is  in 
spite  of  the  fact  that  a  part  of  the  increase  in  wage  rates  has  been 
offset  by  higher  efficiency  in  method  and  facilities.  Comparisons  of 
rates  of  wages,  from  the  annual  statistical  reports  of  the  Interstate  Com- 
merce Commission,  follow: 


Average  wages  per  day 


Class  of  Employees 

1901 

1910 

Increase, 
percent. 

General   office   clerk 
Station  agents   .  .  . 

s  

$219 

$2.45 
2.14 
1.91 
4.34 
2.57 
3.73 
2.72 
3.03 
2.39 
2.20 
1.99 
1.57 
2.16 
2.10 
1.96 

11.87 
20.90 
20.13 
14.81 
18.98 
17.67 
36.00 
30.60 
16.02 
25.71 
16.37 
27.64 
9.09 
6.60 
15.98 

1.77 

Other  station   men 

1.59 

Enginemen  .  . 

378 

Firemen    .... 

2  16 

Conductors 

3  17 

Other  trainmen 

200 

Machinists 

232 

Carpenters 

206 

Other  shop  men 

1  75 

Section  foremen  .  .  . 

1.71 

Other  trackmen 

1  °3 

Telegraph  operators 
Employees,  account 
All  other  employees 

and  dispatchers  

1.98 

floating  equipment 

197 

and  laborers  .  . 

1.69 

29 


APPENDIX  E. 

HOW  RAILWAY  TAXES  HAVE  INCREASED. 
(Data  from  Reports  of  the  Interstate  Commerce  Commission.) 


Year 

Amount  paid 

Average  per 
mile  operated 

Per  cent,  of 
net  receipts 

1900  

$48  332,273 

$251  00 

8.7 

1901  

50  944,372 

260  50 

86 

1902  

54,465  437 

272  12 

8.3 

1903  

57,849  569 

281.76 

84 

1904  

61,696  354 

29069 

90 

1905  

63  474  679 

29255 

85 

1906  

74  785  615 

33636 

88 

1907  

80  312  375 

35309 

89 

1908  (1)  

84  555  146 

36684 

10  7 

1909  (1)  

90  529  014 

38457 

10  1 

1910  (1)  

103  795  701 

43099 

10  3 

(1)  Not  including  terminal  and  switching  companies. 


30 


APPENDIX  P. 

UNITED  STATES  SENATE 

COMMITTEE  ON  POST  OFFICES  AND  POST  ROADS 

September  11,  1912. 
My  dear  Sir : 

I  hand  you  herewith  a  copy  of  Senate  Bill  No.  7371,  introduced  by 
me  by  direction  of  the  Senate  Committee  on  Post  Offices  and  Post 
Roads,  embodying  a  plan  recommended  by  the  Post  Office  Department 
for  determining  the  compensation  to  be  paid  to  railroad  companies  for 
transportation  of  the  mails.  This  general  subject  has  been  referred  to 
a  joint  Committee  of  Congress.  The  Committee  has  not  yet  organized 
and  probably  will  not  do  so  for  several  weeks,  but  as  a  member  of  that 
Committee  and  as  Chairman  of  the  Senate  Committee  on  Post  Offices 
and  Post  Roads  and  under  authority  of  Senate  Resolution  No.  56,  I  de- 
sire to  secure  immediately  such  information  as  may  be  available  for 
submission  to  the  Committee  at  its  first  meeting.  I  will  ask  you,  there- 
fore, to  answer  the  following  questions : 

(1)  Do  you  deem  the  present  plan  of  compensation  an  equitable- 
one  as  between  the  Government  and  the  railroads?    If  not,  in  what  re- 
spects and  as  to  what  classes  of  railroads  is  it  inequitable  ? 

(2)  Is  the  underlying  principle  of  the  plan  embodied  in  the  in- 
closed bill  a  proper  basis  for  compensation?     If  not,  wherein  is  it 
improper,  and  why? 

(3)  What,  in  your  opinion,  is  a  desirable  plan  for  compensating 
railroad  companies  for  transporting  the  mails? 

I  desire  an  early  reply  to  these  inquiries  relating  to  the  general  plan^ 
and,  if  you  are  not  ready  to  do  so  now,  shall  be  glad  to  have  you  submit 
later  a  detailed  discussion  of  this  bill  and  of  House  Document  No.  105,. 
62 d  Congress,  1st  Session,  with  which,  I  assume,  you  are  familiar. 

Yours  very  truly, 

(Sgd.)     JONATHAN  BOURNE,  JE. 
Chairman  Senate  Com.  on  Post  Offices  and  Post  Roads.. 

31 


APPENDIX  G. 
COMMITTEE  ON  RAILWAY  MAIL  PAY. 

October  3,  1912. 

Hon.  Jonathan  Bourne.,  Jr., 

Chairman,  Senate  Committee  on  Post  Offices  and  Post  Roads, 
Washington,  D.  C. 

My  dear  Sir: — 

The  Committee  on  Railway  Mail  Pay,  representing  268  roads  operat- 
ing over  214,275  miles  of  road,  has  been  investigating  the  subject  of 
mail  compensation  for  about  three  years,  or  since  the  Post  Office  Depart- 
ment, in  1909,  sent  out  a  series  of  questions  regarding  the  space  fur- 
nished for  mails  in  passenger  trains,  and  the  cost  to  railroad  companies 
of  the  service  which  they  perform  for  the  Government  in  the  carriage 
of  the  mails.  Therefore  the  Committee  has  thought  it  would  be  of  in- 
terest to  you  to  receive  from  it  an  answer  to  the  questions  propounded 
by  your  letter  of  September  11,  1912,  addressed  to  the  officers  of  rail- 
roads throughout  the  country. 

A  response  to  House  Document  No.  105  is  now  in  course'  of  prepara- 
tion, and  will  be  submitted  at  an  early  date.  In  the  meantime,  our 
committee  desires  to  submit  the  following  replies  to  your  inquiries : 

Question  1. — Do  you  deem  the  present  plan  of  compensation  an 
equitable  one  as  between  the  Government  and  the  railroads?  If  not, 
in  what  respects  and  as  to  what  classes  of  railroads  is  it  inequitable  ? 

Answer. — The  existing  law  has  never  worked  to  the  disadvantage  of 
the  Government,  but  has  failed  to  do  justice  to  the  railways  by  reason 
of  infrequent  weighing;  absence  of  pay  for  nearly  4-0  per  cent,  of  the 
space  occupied  as  travelling  post  offices;  the  performance,  without  pay, 
of  side  and  terminal  messenger  service,  and  the  unjustifiable  reduction 
in  pay  by  the  Act  of  Congress  dated  March  2,  1907,  supplemented  by 
Order  No.  412  of  the  Postmaster  General,  changing  the  divisor. 

The  present  law  is  based  upon  correct  principles,  but  should  be  so 
amended  as  to  provide — 

32 


(a)  For  the  Eepeal  of  the  Act  of  March  2,  1907. 

Notwithstanding  the  large  increase  in  every  other  item  con- 
nected with  the  administration  of  the  Post  Office  Department,  the 
railroads'  pay  has  been  singled  out  as  the  one  element  in  these  oper- 
ations for  concentration  of  economies.  This  too,  in  the  face  of 
the  fact  that  the  operating  expenses  of  the  railroads  have  been 
greatly  augmented  by  the  requirements  of  the  law  with  reference  to 
>teel  equipment,  and  a  general  increase  in  cost  characteristic  of  all 
business  operations. 

(b)  For  annual  weighings,  and  a  definite  and  just  method  for 
ascertaining  daily  average  weights. 

Under  the  quadrennial  weighing  all  increased  weight  of  mail 
during  the  next  succeeding  four  years  is  carried  by  the  railroads 
without  any  compensation  whatever,  which  is  manifestly  unfair. 

The  railroads  must  provide  car  space  and  facilities  for  the  max- 
imum weight  offered  at  any  time,  yet  they  are  paid  only  for  the 
average  weight  carried.  The  Postmaster  General's  order  covering 
the  divisor  has  unfairly  reduced  this  average. 

This  provision  is  essentially  necessary  in  view  of  the  bill  estab- 
lishing the  Parcels  Post,  effective  January  1,  1913,  which  will  re- 
sult in  taking  from  the  express  service  traffic  for  which  the  railroad 
companies  now  receive  compensation  and  transferring  it  to  the  mail 
service ;  the  bill  referred  to  containing  no  provision  for  payment  to 
the  railroad  companies  for  the  increased  tonnage  to  be  handled  in 
mail  cars,  although  such  provision  was  made  for  the  star  routes  and 
the  city  wagon  service. 

(c)  For  pay  for  Apartment  Cars  on  some  basis  that  will  com- 
pensate for  the  service. 

That  the  Postmaster  General  has  himself  recognized  the  justice 
of  such  a  change,  is  indicated  in  the  following  quotation  from  page 
3  of  House  Document  No.  105 : — 

"*  *  *  an  additional  amount  may  be  allowed  for  railway 
post  office  cars  when  the  space  for  distribution  purposes  occupies  40 
feet  or  more  of  the  car  length.  No  additional  compensation  is 
allowed  for  space  for  distribution  purposes  occupying  less  than  40 
feet  of  the  car  length.  This  distinction  is  a  purely  arbitrary  one 
and  without  any  logical  reason  for  its  existence." 


(d)  For  a  fair  allowance  to  the  railroads  for  the  side  and 
terminal  messenger  service  which  they  perform  for  the  Post  Office 
Department,  according  to  the  value  of  this  service  to  the  Post  Office 
Department. 

The  necessity  for  this  is  also  emphasized  by  the  establishment  of 
the  Parcels  Post  which  will  undoubtedly  add  greatly  to  the  ex- 
pense of  the  service. 

(e)  That  all  rates  of  pay  should  be  definite  and  not  subject 
to  the  discretion  of  the  officers  of  the  Post  Office  Department. 

Other  inequities  exist  under  the  present  law,  but  are  due  to  the 
administrative  methods  rather  than  to  the  law  itself. 

Question  2. — Is  the  underlying  principle  of  the  plan  embodied  in 
the  enclosed  bill  a  proper  basis  for  compensation  ?  If  not,  wherein  is  it 
improper,  and  why? 

Answer. — The  underlying  principle  of  the  plan  embodied  in  Senate 
Bill  No.  7371  is  not  correct.  Any  plan  of  compensation  based  upon 
operating  cost  and  taxes,  plus  six  per  cent,  for  profit,  is  fundamentally 
wrong,  because  it  makes  no  allowance  for  return  upon  the  property 
employed. 

Furthermore,  such  plan  is  not  correct,  because  it  involves  paying  the 
highest  rates  to  the  railroad  that  by  reason  of  physical  disabilities  or 
inefficient  methods  is  most  expensively  operated,  and  the  lowest  rates 
to  the  railroad  whose  operations  are  most  efficient  and  whose  service  is 
most  satisfactory  and  valuable  to  the  Post  Office  Department.  Under 
the  plan  proposed,  a  railroad  would  be  penalized  for  all  the  capital  ex- 
penditures made  by  it  for  the  purpose  of  decreasing  its  operating  cost, 
because  the  more  it  decreased  its  operating  cost  the  more  it  would  de- 
crease its  mail  pay,  although  by  making  this  improvement  in  operating 
cost  it  would  have  incurred  an  additional  capital  charge  upon  which 
it  would  have  to  pay  dividends  or  interest. 

The  ascertainment  of  the  cost  to  a  railroad  of  conducting  the  mail 
service  is  necessarily  very  largely  a  matter  of  judgment  and  opinion, 
because  a  large  proportion  of  the  total  operating  expenses  are  expenses 
common  to  the  freight  and  passenger  traffic  and  can  only  be  approxi- 
mately apportioned  and  there  are  various  formulas  existing  for  such 
apportionment.  It  would  not  be  right  or  proper  to  entrust  to  the  Post 
Office  Department  the  discretion  of  selecting  the  formulas  by  which  to 
ascertain  these  costs,  because  the  Post  Office  Department  has  an  obvious 
interest  at  stake,  its  object  always  being  to  reduce  the  railroad  pay  to  a 
minimum. 

34 


The  estimated  cost  of  a  specific  service  is  not  a  proper  basis  for  fixing 
rates  for  transportation  of  any  commodity.  The  railroads  are  entitled 
to  receive  a  full  and  fair  return  for  the  value  of  the  service  performed, 
and  the  ascertainment  of  cost  of  such  service  is  principally  of  value  as 
a  protection  against  the  establishment  of  confiscatory  rates. 

Question  3.  —  What,  in  your  opinion,  is  a  desirable  plan  for  compen- 
sating railroad  companies  for  transporting  the  mails? 

Answer.  —  The  existing  law  has  been  in  effect  for  nearly  forty  years. 
and  those  who  have  worked  under  it  are  more  or  less  familiar  with  its 
operations.  If  it  were  amended  to  correct  serious  inequities,  as  sug- 
gested in  the  answer  to  Question  1,  and  fairly  and  impartially  admin- 
istered by  the  Post  Office  Department,  it  would  be  preferable  to  any 
untried  or  theoretical  plan  that  could  be  proposed. 

Very  respectfully  yours, 
COMMITTEE  0^  RAILWAY  MAIL  PAY, 


(Signed)     RALPH  PETERS, 

Acting  Chairman. 


35 


,    •  ' 

. 


A  „. ™ 

OVERDUE. 


Gaylord  Bros. 

Makers 

Syracuse,  N.  Y. 
PAT.  JAN.  21 ,1908 


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